Softbank’s $20.1 billion bid for a 70 percent stake in Sprint was viewed by many as a life preserver the struggling carrier could hardly afford to pass up. But given the new competition that Japan’s third-largest wireless carrier now faces in satellite TV provider Dish Network, it’s likely going to have to improve its offer if it wants to proceed as planned, say analysts.
On April 15, Dish disrupted what had seemed a done deal between Softbank and Sprint by proposing a merger with the latter. It offered Sprint shareholders $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock.
A counter bid from Softbank is “highly likely,” Canaccord Genuity analyst Greg Miller said in an April 16 research note.
Informa Telecoms & Media Principal Analyst Mike Roberts, in an April 15 research note, wrote that at this early stage, the Dish offer is strategically and financially stronger than Softbank’s offer, which “will force Softbank to strengthen its offer if it wants to win Sprint.”
Gartner analyst Philip Redman told eWEEK that there’s a “good chance” of a Softbank counteroffer.
“Dish’s offer is about 13 percent better than Softbank’s,” he said in an email. However, “It all remains to be seen how strategic the Sprint deal is to Softbank, which is mainly about having a presence in the U.S. The economy is stagnant in Japan and recent currency devaluations may make it more difficult and expensive for a major bidding war.”
Softbank, for its part, suggested otherwise.
It told the U.S. Securities and Exchange Commission in an April 16 filing:
“Softbank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and long term benefits to Dish’s highly conditional preliminary proposal. The Softbank-Sprint transaction is in the advanced stages of receiving the necessary approvals and we expect to consummate the transaction on July 1, 2013 with the terms already agreed.”
The Dish bid represents the second time this year that the company has made a late offer to disrupt a deal in progress. In January, Dish one-upped Sprint’s offer of $2.97 a share, or roughly $2.2 billion, for Clearwire with an offer of $3.30 a share. That deal appears to be leaning in Sprint’s direction, though a committee is still reviewing Dish’s offer, Clearwire said in a March 28 statement.
Canaccord Genuity’s Miller added that while the outcome of a bidding war is “highly uncertain,” the existence of one would benefit the industry on the whole.
“We do believe the competitive bidding process for the lower-quality assets of the U.S. wireless industry will bolster industry valuations overall, as it becomes clear just how spectrum-constrained the market is,” Miller wrote.
This would also improve the position of Verizon Wireless, he added, which Canaccord believes Verizon, a joint owner with Vodafone, continues to try to buy outright.
Some analysts believe a Dish merger is the better fit for Sprint—Gartner’s Redman said Dish “could be the answer to [Sprint’s] prayers”—which may help to encourage Softbank to sweeten the deal in order to push it through quickly. Canaccord’s Miller, however, while expecting a counterbid, offered a pessimistic take on the wisdom of such an effort.
“Even though we are also at a time when spectrum valuation could sharply appreciate on what might be a looming wireless capacity shortage,” Miller wrote, “it’s difficult to envision how a competitive bidding war for the still-troubled Sprint might be worth the risks.”